OPEC statement on oil prices

Statement by Dr Purnomo Yusgiantoro, President/Secretary General of OPEC and Minister of Energy and Mineral Resources of Indonesia on the latest spike in oil prices

The price of the daily OPEC Reference Basket on Tuesday, September 28, 2004, reached a level of $43.54/b, with the year-to-date average rising to $34.66/b, compared to $27.91/b in 2003. On the same day, the price of North Sea dated Brent hit $47.09/b, while WTI closed at $49.90/b, both all-time highs in the UK and US, respectively, fuelling new concerns in the marketplace. This most recent price increase was attributed to unrest in Nigeria’s Niger Delta region, bringing threats of a disruption to the country’s oil production.

Besides this latest development, international oil prices have been on the rise, due to a number of factors, including the hurricanes in the Americas, the legal and supply woes of Russia’s Yukos, and the continuing violence in Iraq, which has undermined attempts to return the country’s oil production to pre-war levels, leading to security of supply fears, even though Iraq has been able to increase its exports to 2.5 mb/d.

In addition, concerns about potential supply disruptions in other major oil-producing countries have also contributed to the spiralling prices.

These tensions have understandably caused considerable speculation in oil futures trading, with the high level of uncertainty instilling what has been referred to as a 'fear factor' into the marketplace, with prices affected by a considerable premium, over and above that which is justified by supply and demand fundamentals.

OPEC has been addressing problems associated with supply and demand, and will continue to do so. At the same time, we recognise that the current situation is not caused by market fundamentals. That notwithstanding, OPEC Ministers will keep in close consultation with the aim of bringing calm to the market.

OPEC is capable of bringing a further 1.5–2.0 mb/d of production to the market, if required, and in fact, some of our Members have already taken steps to ensure that the market remains well supplied.

We will continue to carefully monitor the market situation and take whatever action is deemed necessary, in the interests of the world economy.